Standex International Corp (SXI) 2002 Q3 法說會逐字稿

... Earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please press zero, then star. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ted Trainor, Chairman and CEO. Please go ahead.

Good morning, ladies and gentlemen. With me this morning are Roger Fix, our President and Chief Operating Officer, and Christian Storch, Vice President and Chief Financial Officer. We'd like to welcome you to Standex's third quarter conference call.

One of the first things we do at the conference call is to read the Safe Harbor statement which I'll do now. Some comments made during this conference call may be based upon management's current expectations, estimates and/or projections about Standex's market markets and industry. These statements are forward-looking statements which are not guarantees of future performance and involves certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ from what is expressed or forecasted.

Among the factors that could cause actual results to differ are uncertainties in competitive pricing pressures, general domestic economic conditions and market demand. Today, we issued press statement concerning our third quarter earnings. I'll make a few comments, will then provide some detailed financial data, and then we will open it up for questions.

Sales of the quarter were 136.9 million compared with 140.2 million in the third quarter last year, down to four percent which is the smallest quarterly differential since the economic downturn cited in the third quarter of calendar year 2000. Net income was down 11 percent and our operating cash flow for the quarter was up 37 percent. Some of our business units showed slight -- slight signs of improvement , inched up by 2.4 percent. The question is, is this quick snapshot a sustainable trend or a short-term fortune. Only time will tell. Our inventory levels have been significantly reduced and our employee count is down by 4.2 percent. Gross profit margins remain stable at 32 percent for the quarter and 33 percent for the year-to-date and return on equity was reported at 11.6 percent.

Our total debt-to-capital ratio was 46.1, an improvement over the prior year and our book value per share is $14.43 cents, up 3.4 a year ago. Present time to steel tariff in this year, there was immediately significant increases in steel prices in the 15 to 20 percent range. All steel uses will be impacted and we will be attempting to mitigate these increases, but the reality is prices of products containing steel will significantly increase in the coming months.

We are working diligently to store steel from vendors not by the tariff and by consolidating our buys to maximize volume . However, we do feel price increases will be necessary to maintain our and replenish our lower price inventories with a higher price post tariff .

As a part of focus strategy, we explored the sale of some of our consumer and retail and it's concluded that we can generate more cash flow than the market valued the units at, and therefore, has made a decision to keep these units in the portfolio. The stock price has performed very favorably in recent weeks reflecting the market interest in cash flow dividends and fundamentals in . Standex has an exceptional track record on dividends. Just yesterday, the Board of Directors voted a 21 cent quarterly dividend. This dividend represents the 101st quarterly consecutive dividend paid over a 37 year period and rose 35 times in that .

Our sales, earnings and cash flow effected by the global economic downturn, but due to belt-tightening actions, our focused diversity strategy and fundamental business portfolio, we have not been impacted as severely as some companies. We continue to manage the cash and look forward to an improving economy as everyone has predicted. Maybe we felt a small nudge in that direction in the third quarter.

By the way, we are pleased to see this morning's Standex's financial health rating from a B to a B plus on March 15, 2002. Christian will now provide a perspective on the year-to-date results and additional segments and balance sheet data and then we'll open it up for questions. Christian ...

Thank you, Ted, and good morning, everybody. Our financial milestones for the quarter included the following. We paid down almost $5 million in debt during the quarter, almost seven million during the current fiscal year. And as Ted mentioned, this resulted in an improved debt-to-total capital ratio which is now at 46.1 percent and was 47.5 percent at the end of last quarter. We reduced our working capital mainly due to the decreased sales levels.

However, we had a slight improvement in inventory returns, a reflection of the continued emphasis that all these segments plays on operating cash flow. Depreciation for the quarter was 3.2 million and 9.8 million year-to-date, slightly above prior year levels and reflecting higher capital spending levels in prior years. But the four-year depreciation will be approximately $13 million. We are all set to adopt SFAS 142 as of the beginning of our fiscal year, and therefore, no longer are amortizing goodwill.

Our capital expenditures continued to decline. For the quarter, we spent $1.8 million, slightly below the comparable quarter last year. Year-to-date, our capital expenditures totaled $8.4 million or 85 percent of depreciation. It was a 10.4 million in the prior year. Our cap ex projection for the full year was roughly $12 million. Operating income or EBIT, as the percent of sales decreased from 6.7 to 5.7 percent quarter over quarter, decline of 100 basis points is below the decline of what we saw in Q1 of 130 basis points and Q2 of 120 basis points.

While EBIT margins at all consumer segment improved, margins at both our industrial and food service segments suffered. Interest expense for the quarter is 2.3 million, down about $600,000. For the nine months, interest expense was 7.3 million, down $1.6 million. Our effective tax rate is stable at 38.4 percent and year-to-date, we purchased 223,000 shares on our stock . This compares to 449,000 shares for the nine months in the prior year. 80,000 shares were purchased this quarter. I'd like to turn the conference back to .

OK. Stacey, would you open it up for questions, please?

Thank you. Ladies and gentlemen, if you wish to ask a question, please press one on your touch-tone phone. You will hear a tone indicating that you've been placed in queue. You may remove yourself from the queue at by pressing the pound key. If you are using a speaker phone, please pick up your handset before pressing the numbers. One moment for our first question. And once again, if you wish to ask a question, please press one at this time. And there are no questions in queue. Please continue.

Very well. Thank you very much, ladies and gentlemen. I hope that we gave you some indication of where we are and where we're headed and we're looking forward to keeping our belt tightening and waiting for the economy to do some things. In the meantime, we're taking a stand on the steel pricing and a number of -- a number of situations working on new products and doing the things that position ourselves to come out strong out of the -- when the -- when the recession actually turns around completely. So, we thank you very much and we'll talk to you next quarter. Thank you.

Thank you. Ladies and gentlemen, this conference will be available for replay after 1:30 p.m. today through Thursday, May 2nd, at midnight. You may access the AT&T teleconference replay system at any time by dialing 1800-475-6701 and entering the access code of 632-459. That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.